Halister News

(Bloomberg) -- Fiscal policy expectations drew “sharp reactions” from U.S. markets after Trump won election that underestimate the high risk of “unintended adverse consequences and outright failure,” Hoisington Investment Management’s Van R. Hoisington and Lacy Hunt say in quarterly report to investors.

• Those risks are magnified if programs “are heavily financed with borrowed funds and/or monetary conditions continue to work at cross purposes with the fiscal policy goals”
• Sharp increases in interest rates and USD, along with monetary restrictions, “have worsened the structural impediments to U.S. economic growth that existed before the election and continue today”
  • These include domestic and global debt levels, weak global growth, adverse demographics and spent domestic demand
• As a result, nominal U.S. GDP will rise 2% this year, indicating “very low” inflation and real growth, and “a similar yield on the 30-year in time”
• Fiscal policy initiatives and associated risks include:
  • Tax cuts and credits work slowly, or not at all if not financed by other budget offsets
  • Tax repatriation appears likelier to be put to financial rather than productive use, and has potential to put upward pressure on USD
  • Regulatory reform “is unambiguously positive,” but benefits “build slowly”
  • Trade restrictions “would have the exact opposite effect of the regulatory reforms”
• Hoisington manages $3.7b, including Wasatch-Hoisington U.S. Treasury Fund (8.7% avg annual return over 3 years)